The Securities Appellate Tribunal today set aside the order issued by the Securities and Exchange Board of India (Sebi) in August last year, bolting Arun Kumar Bajoria and his associates out of the capital markets for one year.

Sebi had booked Bajoria for violation of norms governing substantial acquisition of shares. The tussle between Bajoria and Sebi stemmed from allegations by Bombay Dyeing that the jute baron and his associates had violated the takeover code while building up a 13 per cent stake in the company.

In its 43-page order, the tribunal said the alleged violations of the takeover code did not empower the market regulator to completely bar the errant investor from dealing in securities. The tribunal said that Sebi’s move to bar the investor from dealing in securities did not protect his interests adequately.

Reacting to the tribunal’s decision to vacate Sebi’s order, Bajoria said: “I was not much bothered about Sebi’s decision anyway. My associates were more keen than me to seek relief and filed an appeal with the tribunal. I have always felt that the market regulator was biased against us and there was no point in seeking justice from the same authorities. But anyhow, this is a moral victory for us.”

Besides Bajoria himself, the associates affected by the market regulator’s order of August 29, were his relatives—Pooja Bajoria, Mohini Devi Bajoria, Lata Devi Bajoria and Meenakshi Jatia, Mega Resources and Mega Stock—the stockbroking firms through which he operated—and his jute company, The Hooghly Mills.

Explaining its stance, the tribunal said the scope of section 11B of the takeover code was recently scrutinised in detail while deciding on another case. “After detailed consideration the tribunal held that section 11B does not confer power on the respondent (Sebi) to take punitive action. In the light of the facts and circumstances of the case, I am of the view that debarring the appellant from accessing the capital market and dealing directly or indirectly in securities for a period of one year cannot be imposed under section 11 or 11B of the Act,” the order said.

Bombay Dyeing had alleged that Bajoria had not informed the company about his holding when it crossed the 5 per cent mark, as required under the standard norms. In defence, Bajoria said that he had informed the Calcutta Stock Exchange, and produced a letter to that effect to substantiate his claim. Not only did Sebi refuse to admit the letter as evidence, it said, he had tried to “create evidence”.

Bajoria was upset when Sebi announced its decision to bar him and his associates from entering the capital markets for a year. He had threatened to file a writ against the order on grounds that the penalty imposed on him was disproportionate with the alleged offence. “Even if for argument sake, I admit that I had made a mistake, I do not deserve this punishment. In the past, Sebi had imposed a small fine for similar offences,” he had said.

Bajoria had substantial exposure in equities till the scam surfaced a year back. He had amassed huge stakes in at least two companies—Bombay Dyeing and Kanoria Chemicals & Industries—by slowly acquiring shares from the market. He continues to hold over 6 per cent stake in the former, and around 14 per cent in the other.

Bajoria was not much affected by Sebi’s order in August last year. To protect his interest, he transferred his shares to associates not affected by the order. He could have, through his associates, offloaded his shares in the market—even subscribed to Bombay Dyeing’s ongoing open offer—but they chose not to. Bajoria said he still held close to 25 lakh shares of the Nusli Wadia-promoted textile company.

UTI WEIGHS ROLLOVER OF MONTHLY PLANS

FROM SATISH JOHN

Mumbai, March 19:

Mutual funds major Unit Trust of India (UTI) is expected to offer “a rollover option at par value” to investors by extending the period of the three monthly income plan (MIP) schemes due for redemption from April to June this year.

The net asset values of the schemes due for redemption are way below the face value of Rs 10. The total corpus of the four schemes which include MIP 97 (I), MIP 97 (11), Institutional Investor and MIP-95, is in the region of Rs 4,000 crore.

The difference between the face value and net asset values of two of the schemes—MIP-97 (I) and (II)—will be met by dipping into the Rs 1,800 crore development reserve fund (DRF) of the mutual fund major, created specially to meet such exigencies.

However, in the case of
MIP-95 due for redemption in
the month of June this year, the mutual fund is comfortably placed.

The country’s largest mutual fund with over 41.8 million unit holders, is likely to take a hit of Rs 1200 to Rs 1300 crore by virtue of its assurance to redeem the schemes at face values.

Speaking to The Telegraph, R Rangarajan, general manager, responsible for the 41 debt schemes in UTI’s portfolio, said it was an option that the fund planned to give its MIP unit holders. “We will dip into the DRF to meet the shortfall,” he confirmed.

“The modalities and approvals from the market regulator are still being worked out,” he added.

UTI hopes to retain investors’ funds by offering to extend the tenure of the scheme. In any case, even if the investor plans to opt for the extended tenure it would mean that the mutual fund would have to dip into the DRF to make good its commitment on the redemption at face value.

It is, however, looking to gain the trust of its unit holders by meeting its commitments, by redeeming units at face value and at the same time start the extended tenure of the MIPs with a clean slate.

However, there will be no further assurances on the redemption values for the extended tenure of MIP 97s, he added.

Rangarajan said the rollover option is not a new concept for the mutual fund. We have always been offering “a switchover option” to our unit holders. “We have in place a switchover option for our gilt fund and bond fund unit holders,” he said.

RANBAXY GETS US NOD TO MARKET SEDATIVE

FROM OUR CORRESPONDENT

Mumbai, March 19:

Ranbaxy Laboratories Ltd has secured final approvals from the US Food and Drugs Administration (FDA) to market the generic
version of Roche’s Versed
syrup (used as a children’s sedative).

The approval is yet another achievement for the research-oriented pharmaceutical major, more particularly in the US markets where it already has attained a critical mass, with turnover from the country put at close to $ 113 million.

In a communication issued to the stock exchanges today, Ranbaxy said that Ranbaxy Pharmaceuticals Inc, (RPI) a wholly owned subsidiary of the company, has received final approval from the US FDA to market Midazolam Hydrochloride Syrup, 2mg (base/ml).

The approval, it added, has been granted to RPI prior to the expiry of the exclusivity of the new dosage form, that will be effective till April 15, 2002. This is based on the mutual consent with Hoffman LaRoche Inc, which has waived its remaining exclusivity with respect to this product.

RPI, it further pointed out, plans to launch this product before May 15, through its own sales & marketing team and distribution work. Sales will focus on an 118 ml dosage, bio-equivalent to the innovator product for this controlled substance.

The approved formulation is the result of Research & Development efforts that focussed on the active pharmaceutical Ingredient (API) and the bio-equivalent formulation both of which were developed through the scientific capabilities within Ranbaxy Laboratories, Gurgaon India, it noted.

GOVT HOLDS OUT HOPE FOR FOREIGN COMPANIES

FROM OUR SPECIAL CORRESPONDENT

New Delhi, March 19:

To provide a level playing field, the government is planning to progressively bring down the corporate tax rate on foreign companies from 40 per cent and align it with the rate applicable to domestic companies.

Revenue secretary S. Narayan indicated this to businessmen here at a seminar organised by the Indo-US Chamber of Business. The government recently cut the tax rate on foreign corporations from a hefty 48 per cent to 40 per cent.

However, it has yet to bring it on a par with Indian companies which are being taxed at 35 per cent plus a 5 per cent surcharge. This works out to a total of 36.75 per cent. Narayan said the budgetary announcement of full convertibility of deposit schemes for non-resident Indians was a major step towards achieving complete convertibility of rupee, implying that the move continued to remain alive.

He also assured industrialists that the government will continue with its policy of levying counter-veiling duty (CVD) and special additional duty (SAD) on select imports in order to shield domestic manufactures from cheap imports.

“The CVD and SAD on select items will remain in national interest just like in the US,” the revenue secretary said. Narayan explained that high duty shield would be used to protect industries like steel and automobiles but added these shields would be “flexible”. He also pointed out that despite the reduction in peak customs duty the effective rates of protection (ERP) are positive for most products.

Narayan also said the government had continued with its past practice of bringing down duties on raw materials and hiking duties on finished goods. In the future too, this trend would continue and plans were to bring down duty on raw materials to 10 per cent and that on finished goods to 20 per cent by 2004-05.

VILLAGES KEEP WAITING FOR BSNL CALL

FROM M. RAJENDRAN

New Delhi, March 19:

Over 500 ‘inaccessible’ villages, located in hilly areas or swamplands in West Bengal, Bihar, the north-east and a few other states like J&K and Uttaranchal, which have no telephone links with the rest of the country, are unlikely to get one any time soon, thanks to a stalemate between Bharat Sanchar Nigam Ltd and the finance ministry.

While BSNL has the necessary equipment to provide those links using advanced equipment like digital satellite phone terminals (DSPTs), it has refused to install the village public telephones until its demand for funds are cleared by the finance ministry.

The stand, however, flies in the face of the commitments it had made to the communications ministry to link the villages with the rest of the country. All basic operators—including private telephony operators—are required to meet VPT installation targets, but have consistently come up short, indicating a reluctance to wire up low-yielding revenue areas.

Union communications minister Pramod Mahajan has, in the past, threatened stern action against those who fail to meet the VPT targets, but it appears to have had little effect.

The officials claim the government had promised that BSNL would be compensated for installing VPTs in non-remunerative areas and hence no equipment can be ordered without prior approval from the finance ministry.

Last year, BSNL had prepared two alternate plan proposals on rural telephony for 2002-03. One proposal was to allot Rs 17,853 crore, which included a sum of Rs 4,206 crore as compensation from the government towards rural telephony. The other was a scheme for Rs 14,076 crore, including Rs 1 crore as compensation. However, the Planning Commission approved an outlay of just Rs 1 crore.

On Monday, BSNL processed a Rs 250-crore tender to purchase 17,500 DSPTs, to be set up in West Bengal, the north east and a few inaccessible areas. The DSPTs will be used for the first time in the country. A consortium formed by US-based firm Prajaya and Bangalore-based United Telecom Ltd (UTL) bagged the tender, quoting Rs 150 crore for the supply of the DSPTs.

The cost of the phone per-line is estimated at Rs 42,000, since two lines can be provided from one terminal. DSPT uses the Ku-band very small aperture terminals (Vsat) and the Insat satellite to connect calls.

Currently, villages have been provided with a VPT using the MARR system, underground cables, overhead lines and Inmarsat mini-M-terminals.

The government also plans to extensively use new technologies like C-DoT PMP systems as well as wireless in
local loop (WLL) systems to meet VPT targets.

A senior member of the BSNL board said, “We hope to get the finance ministry’s clearance soon, but till then we cannot give purchase orders based on the tender results. After BSNL was corporatised, the government had assured us of financial support for investments made by us in non-remunerative areas. So we are simply waiting for a reply from the finance ministry.”

“While the department of telecommunications (DoT) has installed VPTs
in areas that are inaccessible by road,
the private fixed line operators have
not installed phones even in villages that are near bus stands. After corporatisation, we have to pay many dues as a corporate entity and are asking for the guarantee which was promised to us,” sources said.

Last week, a meeting of chief general managers chaired by communications minister Pramod Mahajan discussed the strategy paper on VPTs and to review and assess the progress.

“An action plan has been proposed that comprises the use of the technology mix, logistics management and the achievement of targets in a realistic time frame,” sources said.

COKE BUBBLES WITH CONFIDENCE

FROM RAJA GHOSHAL

Bareilly, March 19:

Coca-Cola India achieved break-even in December last year, according to Alex von Behr, CEO and president of the cola giant’s Indian operations.

Von Behr, who was here to inaugurate a new PET bottle line for its franchisee-owned bottling plant Brindavan Beverages yesterday, said the company had so far invested about $ 840 million in its India operations. In India, Coca-Cola has 15 franchisee-owned bottling plants and 33 company-owned bottling plants.

The new PET bottle line for Coca-Cola, set up at a cost of Rs 6.5 crore, got rolling at the Brindavan Beverages Plant here yesterday.

This takes the total investment to Rs 65 crore in this plant which is owned by S.N. Ladhani, the franchisee who set up the plant four years back.

The new line which will make PET bottles of 500ml, 1.5 litre and 2 litre for all carbonated soft drink brands of Coca-Cola, has a capacity of producing 4000 bottles per hour. The plant is also planning to start production of Kinley, the water brand of Coca-Cola, this season in all pack sizes.

A similar PET bottle line is to be put up by the Ladhani group in either Faizabad or Lucknow. The four Ladhani brothers own as many Coca-Cola plants in Uttar Pradesh. The plant at Agra, owned by Gulab Ladhani, is the first Coke franchisee plant in India set up when the cola giant re-entered the country in 1993.

S.N. Ladhani is also opening a water production facility in Bangalore within a few days.

Recently Coca-Cola slashed the prices of its 1.5 litre and 2 litre PET bottles from Rs 43 to Rs 38, and from Rs 50 to Rs 43 respectively.

Von Behr said, “Affordability is a key factor for growth and the slashing of PET bottle prices and the introduction of 200 ml glass bottles are part of the move.”

The Bareilly plant caters to Uttar Pradesh, Uttaranchal and the adjoining areas. About 25 per cent of the total carbonated soft drink market of 30 million cases belongs to PET bottles, said S.N. Ladhani, managing director of Brindavan Beverages.

Von Behr refused to say anything on plans to divest its stake in Hindustan Coca-Cola Beverages (HCCB), its downstream venture which is the holding company for the company-owned bottling ventures.

ALUMINIUM MAJORS PUT ON RETHINK CAP

BY A STAFF REPORTER

Calcutta, March 19:

Hindalco and Sterlite Industries are likely to reconsider their plans to expand capacity and set up greenfield projects, following the proposals in the budget which are expected to adversely affect the aluminium industry.

Sources said both the domestic aluminium majors will have to bear the brunt of the budget exercise, which may lead to a glut in the market. The Union Budget-2002 has cut across-the-board the import tariffs on aluminium from 25 per cent to 15 per cent.

“This will have a very negative impact on the sales of domestic companies which will certainly face stiff competition from the imported products that are going to flood the Indian market,” industry insiders say.

Sources pointed out that Hindalco and Sterlite products will be on the defensive for price reasons. “The domestic market is already very sluggish and so are the international markets. Hence, raising capacity will create a price pressure at least in the short-term and medium-term,” they added. The aluminium industry sought a three-tier import tariff structure in the budget. While higher tariff was anticipated for downstream products, the industry expected lower tariff for ingots and raw materials.

AGGRESSIVE PRICING IS PARLE’S CORE STRENGTH

FROM OUR CORRESPONDENT

Mumbai, March 19:

Prices of consumer products may be going through the roof, but one segment that has assiduously ducked the trend for the last six years is the Rs 1400-crore glucose biscuit market. The credit goes to market leader Parle Products, which has zealously maintained the price barrier of Rs 4 per 100 gms. Its flagship brand Parle-G has a share of over 65 per cent of the organised segment of the glucose biscuit market.

Speaking to The Telegraph, Ajay Chauhan, executive director at Parle Products, said the prices were maintained despite several improvements in packaging and add-ons (such as more nutrients) to the product.

He said the company could resort to such aggressive pricing by setting up manufacturing units and outsourcing centres near major markets, which enabled it to save on freight and distribution costs.

The even keel pricing may also have a lot to do with the competition from Britannia and aggressive regional players such as Priya Gold, in a market that is extremely price sensitive. In fact, Britannia has, in a remarkably short period of time, wrested a 20 per cent market share with its Tiger brand.

The MNC had, earlier this year, tried testing waters by hiking retail prices for Tiger in Ludhiana (where it is the market leader) and Gujarat (where it lags behind Parle). However, the terribly price-sensitive market would have none of it, forcing Britannia to backtrack and bring prices to original levels.

The biscuit industry is divided into core and non-core sectors, with the core sector comprising glucose, milk and Marie biscuits, while the non-core sector consists of cookies, sweet & salt, assorted and wafer biscuits. The glucose category alone contributes to 55 per cent of the total biscuit
market.

TATA INFO ARM PLANS RS 60-CR EXPANSION

BY ALOKANANDA GHOSH

Calcutta, March 19:

Tata Infotech Education has lined up an investment of Rs 60 crore for expansion of its operations in India and overseas. The company recently started operations in Vietnam, Columbia and South Africa and is also in talks with various institutes in China for a partnership.

“We now have 15 centres overseas, which is expected to go up to 100 in the next two years,” says Rahul Thapan, head of the education services division.

The unit, which is part of the Rs 525-crore Tata Infotech, contributes around 6 per cent of the total revenues.

Tata Infotech presently has 315 centres in India and plans to increase the number of centres to 500 by March 2003 and 700 by March 2004.

The education division has decided to focus on corporate training for the next two years. “This year almost 30 per cent of our revenues came from corporate training. We expect this to go up to 40 per cent in the next year,” Thapan said.

The corporate training drive has been made possible through two initiatives—e-learning and training of overseas customers. “Initially we will target the existing customer base of Tata Infotech, which we have acquired through our services division